Internet, broadcasting, recorded music
Pandora, the world’s largest Internet radio service, will pay record companies more money to stream its music following a long-awaited decision on Wednesday by the three-judge panel of the U.S. Copyright Royalty Board. The Board, a panel of three federal judges, decides how much Internet radio stations such as Pandora must pay record companies. Under a 1995 law and its successors, disputes over this rate are settled by the Copyright Royalty Board.
But the new fee represents a comparatively small increase – the record companies were seeking much higher rates. The new statutory per-stream rate os paid to recorded music rightsholders by non-interactive digital ‘radio’ platforms such as Pandora and iHeartRadio. the non-subscription per-stream rate set by the CRB will be $0.0017, which $0.0003 more per stream than recorded music rightsholders currently receive from Pandora. According to MBW calculations, that will mean Pandora paying out $94.1m more to recorded music rightholders next year compared to 2015 for the same amount of consumption. However this rate will only apply for definite in 2016 – the following four years (2017-2020) will be determined by fluctuations in the US Consumer Price Index, which could bring the rate back down – or push it further upwards. In the wake of the CRB’s decision, Pandora shares, which had plummeted 27% in 2015 before closing Wednesday at $13.44, were surging 20% in after-hours trading. SoundExchange has been arguing wants to almost double it to $0.0025. In 2014, Pandora paid out $446.4m to all music business rightsholders, according to its SEC filings. (From a total cost of sales of $508m). A rate court ruled that ASCAP is entitled to 1.85 percent of Pandora’s revenue, and this year, a court ruled that Pandora must pay 2.5 percent of its revenue to BMI for the use if songs – so by far the biggest share of revenues were paid to labels and artists in 2014: $407.8m. But SoundExchange said “We believe the rates set by the CRB do not reflect a market price for music and will erode the value of music in our economy” and one commentator noted “Whatever the case, a competitive marketplace – not federal judges – ought to be setting prices” adding “The radio business is changing quickly. The sooner government gets out of it, the better off artists and consumers will be.”
http://www.bloombergview.com/articles/2015-12-16/deregulate-the-music-industry and http://www.thestreet.com/story/13398099/1/pandora-hit-with-higher-costs-as-royalty-board-hikes-streaming-rates.html